In an FX forward that hedges a foreign currency receivable, the accrual of a premium would result in a debit being made to earnings.

Question

Quizplus · Accepted Answer

In an FX forward contract used for hedging, the accrual of a premium does not directly result in a debit to earnings. Instead, the premium affects the overall cost or gain from the hedge, which is recognized in earnings over the life of the hedge or when the hedge is settled, depending on the accounting standards applied (e.g., IFRS or US GAAP) and the specific hedge accounting treatment.

In an FX Forward That Hedges a Foreign Currency Receivable